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TheLeaseAndPurchaseOptionIfyouhaveaninvestmentproperty,shouldyourentitorsellit?Theanswertothatquestionisthatyoushoulddoboth.Ifyouhavelotsoftimeonyourhandsandarehandywithtools,youcanchoosetorentoutyourproperty.However,ifyouhaveseveralpropertiesforrent,maintainingthemcanconsumelotsofyourtime.Youcanchoosetohiresomeoneelsetomaintainyourproperties,butitcostyoumoney.Andhigherexpensesmeanlowerprofits.Inadditiontoinvestingyourtime,findinggoodtenantsforyourpropertiesisnoteasy.Tenantsthatchoosetorentusuallydoitforareason.Theyareusuallyhavingcreditproblems.Inaddition,mosttenantsdonottakegoodcareofyourpropertiesliketheywouldtheirownhomes.Andwhenthingsgosour,theycanmessupyourhousebeforetheymoveout.Yourgoalistofindgoodtenantstorentyourproperty,transferthemaintenanceresponsibilitytothem,andcreateincentivesforthemtoeventuallybuyyourproperty.Includingtheoptiontopurchasetotheleastcontractcaneliminatemostoftheheadachesassociatedwithmaintenanceanddealingwithbadtenants.Thereareseveralotherbenefitstotheleaseandpurchaseoption.Becausetherentisusuallyhigherwhenyouincludeanoptiontopurchase,thiscaneliminatemosttenantsonlywantingtorent.Peoplelookingfortheleaseandpurchaseoptionarethoseusuallyintheprocessofrebuildingtheircredit,oraresavingmoneyfortheirdownpayment.Tobefair,thedurationofthecontractshouldbebetween2to3years,longenoughforyourtenantstorebuildtheircredit.Thiscontractalsotransfersthemaintenanceresponsibilitytoyourtenants.Nothavingtoworryaboutmaintainingthepropertyfreesupyourtimeforyoutocontinuetoexpandyourbusiness.Givingyourtenantstheoptiontopurchaseyourpropertycreateanincentiveforthemtotakebettercareofyourproperty.Youmayalsochoosetoapplysomeoftheirrentstowardthedownpaymentiftheydecidetobuyyourproperty.Thisisanotherincentiveforthemtopaytherentontime,andeventuallybuyyourpropertyatthelockedinprice.Duringthecontract,youcannotsellthehousetoanyoneelseotherthanyourtenants.However,youchargeyourtenantsafee(usually1to2percentofthepurchaseprice)fortheoptiontolockinthepriceofyourproperty.Ifyourtenantsdonotpurchasethepropertybeforethepurchaseoptioncontractexpires,yougettokeeptheoptionfee.However,ifyourtenantsutilizetheoptiontopurchaseanytimeduringthecontract,youmustreturntooptionfeetoyourtenants.Eitherway,youaremakingmoneywhetheryourtenantsbuythehomeornot.Ifyourtenantsdecidenottopurchaseyourpropertyandthecontractexpires,youcanbegintheentireprocessalloveragain.Theimportantpointsabouttheleaseandpurchaseoptionarethatyouarelookingforgoodtenantstorentyourproperty,createaconstantcashflowfromtherent,transferringthemaintenanceresponsibilitytoyourtenants,whichfreesuplotsofyourtime,andeventuallysaletheproperty.Yourultimategoalistosellthepropertytogoodtenantsatapricethatisfair.Thedealshouldbefairenoughthatbothpartiescomeoutfeelinglikewinners.Thisisimportantifyouwanttobeinthisbusinessforalongtime.